Some thoughts about Cisco and the market

Cisco reached its low several weeks ago and today it is still at the same level so basically the 10% market drop in the last 10 days has not knocked it down. I mention this as an indication that the stock seems to have bottomed. But regardless of that the company is fundamentally a great company. There is a lot of bad karma against Chambers, I personally like him I think he was a victim of his own past success, the stock became incredibly overvalued and after the dot com crash it never recovered from those levels which is comprehensible because they were absurd. But if you look at the company in the last decade it has never stopped growing, selling more, generating more cash and reducing its stocks outstanding. So there is a serious disconnect between the stock price and the company performance and the disconnect is because the stock simply was way way too overvalued by the end of the nineties.

Anyways the company is great and the price is great, my hope is that the market tanks more or at least long enough to deploy all my cash which is still quite a lot and I have the chance of already having identified several companies I would love to add more stocks to so I really do not care about this correction on the contrary I am glad it came, imagine if the market was up, I would be sad for me because I would have a lot of cash uninvested, now I finally might have a chance to deploy it. And I think it can go much lower, the market is still much higher than its level last year and the current situation does not look better.

Cheers!
jrv

PD: this post was originally meant as a reply to this comment from Joe Escobedo from a previous post.

About jrv

I was born in Spain and lived in Belgium, Chile, France, USA, Argentina among other places. Currently I am trying to settle down in a wild place. I am "retired", even though now I dedicate more hours "working" for my investments than I ever worked in the real labor market where I used to work in IT and Banking. I am a family man, I have a lovely wife, several sons and one step daughter. I have humble tastes, I like to stay home and read about companies and investments. I started investing at 25 before the internet bubble exploded. I did not know much about investing and liked technical analysis so my results were pretty bad. Fortunately I did not have much to lose. Some years later in 2006 bored of doing only real state investments and with quite a lot of money saved I opened an account in a cheap and excellent online broker and started again. This time I did not want to commit the same mistake, so I decided to follow a model. I heard that Warren Buffett was the best at making money via stocks so I started by reading a lot about him, all of his shareholders letters and several of the books that he recommended. I learned a lot, started applying his investing principles and reading a lot of 10K's. Digested news from lots of different sources. Basically I started buying very good and cheap companies and holding them for ever if possible and if nothing changed fundamentally. When the housing crisis started I was more than 75% cash. At that time I identified good companies at incredibly cheap prices so I invested most of my savings in stocks. In less than I year I doubled. By the second semester of 2009 I turned my software company into an investment vehicle and dedicated myself full time to it. My wife and I decided to change our lifestyle and moved from Belgium to the beach in a wild country. The goal was to keep fixed costs low in order to be able to live with a minimum 6-8% yearly return but specially to move away from the inhuman life of civilization and to have finally some peace and sunny weather to concentrate better on investing. Now I can think and study about companies 60 hours a week and I am doing great. I can finally do what I want full time and can proudly say that I have never been so happy, specially also with my just born 4th son, my other great kids and my sweet wife who supports me fully while I study most of the day and patiently wait for the opportunity to make a swing ! You can learn a bit more about my portfolio by viewing it at www.kuchita.com/view/sumo.php or you may learn more about me and my family by following the link "Author's site" from the menu above.
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